China - Selling and buying

Reaching the consumers

Marketing opportunities

Consumer behavior: China is a `collectivist' society, group prevailing over the individual. As a result, Chinese consumers largely 'adhere' to the standards and rules of the group to which it belongs. Enormous passion for golf in China (1 million golfers) during the last few years, testifies to this need to belong to a group (the affluent) and the consequent conformity of attitudes of individuals to the group expectations.

Also, advertizing promotions in China frequently directs groups rather than individuals. Today, the single child generation wants to live a very good life and thus spend (education, luxury items, consumption goods), especially in large cities. The consumption is often ostentatious as witnessed by the explosion in the number of luxury cars in the Peoples' Republic of China, as the Chinese social recognition and thus membership of a group. Mainly due to the need for conformity with the reference group, there are hardly any individuals ready to run the social risk of being "different" as compared to their reference group. Contrarily, once a product is adopted by the reference group, the passion is extremely rapid and to a wider extent.

Consumer profile: It is not a single China, but many Chinas. The middle-class represents approximately 240,000,000 people, according to the Academy of Social Sciences of China, i.e. 19% of
the total population. According to the more realistic estimate of the American firm Mc
Kinsey (which tackles the `middle-class' issue from the incomes angle and not under the assets angle of the academy of social sciences); 105 million urban Chinese households, primarily on the coastal strip, should have more than 25,000 RMB per annum in 2009. According to the Mc Kinsey firm, the low middle-class should represent 290 million people in 2011, and would reach 520 million people in 2025. Today, 120 million Chinese still live with less than 1 USD/day.

The Chinese consumer is very brand sensitive. Chinese consumers feel that price is an indicator of the quality of a product. Price and sale service are the most important selection criteria. On the other hand, aspects such as guarantee, possibility of product refunds are less important. Generally, the Chinese attach great importance to information research on a product, before purchasing it. The independent information source is the word of mouth. Chinese consumers are eager to find out what is available, particularly as regards foreign products. They are very curious about foreign products but still prefer domestic products.

Distribution network

Evolution of the sector: Dominated by an official system in the past, distribution today obeys the rules of saving in not structured trade. Principal activity areas of the country are located around Shanghai, Beijing, Guangzhou and Hong Kong. Retail distribution has developed in big towns, hypermarkets are increasing rapidly in the majority of the big Chinese cities.

Types of outlet: Mass distribution is dominated especially by large Asian groups such as Shanghai Bailin which has 5000 sales outlets and a turnover of 6.8 billion Euros. However, foreign groups have successfully established in China, such as Carrefour orWal-Mart. Chinese distributors have the most significant market share. Asian groups are also present in China, such as the Thai Lotus. In the rural areas, traditional trade is still significant because foreign firms have not yet established there.

Market access procedures

Non tariff barriers: Only companies or institutions authorized by the Ministry of Foreign Trade and Economic Co-operation (MOFTEC) can run foreign trade operations. Two methods are possible: Foreign Trade Companies or producing companies entitled to trade with foreigners (import for their personal use provided they have stable export balances). Today, there are nearly 9000 companies authorized to run foreign trade operations in China (14 in 1979). More than half of value imports of China is subject to import licenses. Initial authorization is issued by various organizations according to the product, but the final delivery is subject to acceptance by the MOFTEC. To obtain these authorizations, the importer must have exact foreign exchange reserves and justify the necessity to import. Delivery of licenses often depends on the sphere of activity, which may be encouraged, allowed, restricted or simply prohibited, according to the investments regulation promulgated by China. It is essential in all cases to have solids relations within the Chinese Administration for obtaining these licenses.Many goods imported into China are subject to inspection. Prior inspection in the exporting country for certain products (textile in particular), or inspection at the port or the incoming airport to check that the products are well in conformity with the Chinese standards. These checks are carried out directly and exclusively by the Chinese authorities.

Customs classification: China applies the Customs Harmonized system (on the basis of the international 6 figure key).

Import procedures: To reduce customs clearance time, certain companies can, in cases where description, specifications and quantity of import of goods are determined, declare to the customs in advance and present the documents after the imports are dispatched or before the arrival or in the 3 days which follow the arrival of the goods in a customs surveillance zone. The Customs will examine the goods directly and will release the goods after their arrival.

The declaration can be done via the customs site, by indicating the place of arrival of the goods, as well as all the customs data. Once the data is analyzed by the customs, a receipt will be sent, so that the company can complete the cargo of the goods. Custom duties is then paid by bank transfer.

Documents to be presented to customs vary according to the products. However there are standard documents to be presented: the bill of lading, the invoice, the packing list, the customs declaration, the insurance policy, the sale contract or the inspection certificate of the AQSIQ (General Administration of the PRC for Quality Supervision, Inspection, and Quarantine) or other licenses of safety and quality.

Since 1 October 2012, all exporters of food products to China must be registered with the AQSIQ.

Organizing goods transport

Organizing goods transport to and from: Eight ports in mainland China are included among the 30 top container harbors in the world. The port of Shanghai is by far the busiest in the world. The cargo turnover of Shanghai port exceeded 650 million tons in 2010. Each year, Chinese ports dispatch 5.6 billion tons of goods and 93 million of containers. Goods transport by road represents approximately 12 billion tons of freight. Road transport accounts for 13% of cargo in China.

Air transport represents approximately 2.2 million tons of freight of merchandises. China currently has 180 civil aviation airports, including the world's second busiest in Beijing.

Railroads are the principal mode of transport and the cheapest solution for long distance freight. Each year, railroads provide the transport of 1,500 billion tons kilometers of goods. By the end of 2011, China had a total of 91,000 kilometers of railway, which is utilized to meet freight and passenger demand, ranking second in the world in terms of length. Freight volume reached 3.6 billion tons in 2010, 300 million tons more than in 2009.